Title: Responses of macroeconomy and stock markets to structural oil price shocks: new evidence from Asian oil refinery

Authors: Thai Le; Marta Disegna

Addresses: Department of Accounting, Finance and Economics, Bournemouth University, 89 Holdenhurst Road, Executive Business Centre, BH8 8EB, Bournemouth, UK ORCID ID: 0000-0003-0255-7761 ' Department of Accounting, Finance and Economics, Bournemouth University, 89 Holdenhurst Road, Executive Business Centre, BH8 8EB, Bournemouth, UK ORCID ID: 0000-0002-3638-6772

Abstract: In extensive oil-related literature, less attention has been paid to Asia and particularly little evidence is known for oil-refining countries. This paper examines how the economy of an oil-refining country reacts to an oil price shock and performs cross-country comparisons with oil-exporting and oil-importing countries. Singapore (oil refiner), Japan (oil importer), and Malaysia (oil exporter) are analysed through a structural vector autoregression (SVAR) model using both macroeconomic and financial variables. Results show limited reactions of both macroeconomic indicators and stock returns to an oil supply shock, and an oil aggregate demand shock negatively impacts economic activities. Our findings reveal that the country's status in the oil market is important when an oil-specific demand shock is analysed. Our findings inform policymakers of the effectiveness of using monetary policy tools such as interest rate and exchange rate to mitigate the adverse effects of an oil price shock.

Keywords: oil price; oil refining; stock return; SVAR; structural vector autoregression; Asian economies.

DOI: 10.1504/IJMEF.2021.116546

International Journal of Monetary Economics and Finance, 2021 Vol.14 No.3, pp.265 - 294

Received: 02 Oct 2019
Accepted: 12 Nov 2020
Published online: 27 Jul 2021 *

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